Excerpt from one of the financial reports prepared by the Petersons and rejected by the judge.

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Weak rules govern guardians

Article by: JAMES ELI SHIFFER

Star Tribune

August 18, 2010 - 7:46 AM

Social workers in Aitkin County had a problem: They needed someone to make decisions for three mentally impaired people who could no longer manage their own affairs. So in 2003, the county made a public appeal in the local newspaper.

Paul and Frances Peterson, who had no experience as guardians or conservators, offered their services. What followed was a failure of the state's guardianship system that the county is still untangling seven years later.

Altogether, Aitkin County asked the Petersons to manage the affairs of five individuals, including three men with six-figure bank balances. After one of their wards died, the Petersons continued to write checks on his account, violating a court order and state law. The county had to give another wealthy ward $100 for food because the Petersons did not give him any of his money.

A district judge, who found numerous accounting problems, terminated their oversight in 2008 and subsequently ordered the Petersons to give back half of the $80,500 they paid themselves over five years. But the judge's order is on hold because an appeals court said there were no clear guidelines on how much the Petersons could charge for their work.

To family members and advocates, the inability of the courts to hold the Petersons accountable shows how the state needs new tools to crack down on poorly performing guardians and conservators, who are unlicensed and virtually unregulated in Minnesota.

"There has to be a form of professional standards, regulatory oversight or sanctioning ability," said Roberta Opheim, the state mental health ombudsman. "To me, it's about people abusing their power and authority granted to them for a humane purpose."

Opheim said there's no limit on how many wards a guardian can oversee. Some guardians have as many as 40 people under their control, she said.

Since 2007, Aitkin County Attorney James Ratz has been investigating how the Petersons handled money for at least one of their wards, according to a March 2010 letter to one of the ward's attorneys.

In an interview, Paul L. Peterson, 65, agreed that his accounts are not "free of human error" but he predicted he would be exonerated.

"There's no funny stuff with the funds," he said.

Peterson blamed complaints on hostile social workers, difficult family members and the erratic behavior of one ward. He said he and his wife's big mistake was letting "ourselves get talked into doing it in the first place."

William Hohenauer, a former ward who spent four years trying to get his money back, accused the Petersons of raiding his accounts. "They went in and took what they wanted for themselves," he said. "The court let them get away with this."

On June 17, six days after his interview with the Star Tribune, Hohenauer died of cancer. He was still waiting for his money.

An unregulated profession

When adults are incapacitated by mental illness or some other condition, a judge will often appoint someone to take over their lives. Guardians are not caregivers, but they make decisions about wards' medical treatment, housing and sometimes even who can visit them. Conservators pay their bills and manage their money. More than 24,800 Minnesotans live under such protection.

Revelations of failed oversight and questionable conduct by guardians prompted state lawmakers last year to affirm the rights of wards and protected persons. Guardians and conservators were required to register with the state by 2013, but advocates think lawmakers should go further by requiring certification and licensing.

Susan Cebelinski, Aitkin's social service supervisor, said the county did a criminal background check and checked for any civil findings of maltreatment before recommending the Petersons for the job in 2003. The Petersons were newcomers to the rural county that borders Lake Mille Lacs. They previously ran a tax and accounting business, but neither is a certified public accountant.

"I thought we were doing basically a community service," Frances Peterson testified in 2008.

Their fees started at $35 an hour, the county's rate for overseeing indigents. The Petersons later bumped those fees to $50 an hour for three wealthy clients because of the "complexity" of each case, they testified. They also paid themselves a flat fee of $250 per month for each of those clients.

Including their fees, the Petersons spent at least $493,000 on those three wards between 2003 and 2008 for such things as nursing home care, insurance and travel expenses, records show.

Signs of trouble

About a month after the Petersons landed their fifth client, Joseph Langa, an Aitkin County social worker complained about how they were treating the 62-year-old with Down syndrome. "It concerns me that you, as new guardians in our county, have come on board and tried to disconnect Joseph from this agency without sitting down to discuss his needs," the social worker wrote in a letter to the Petersons.

The Petersons blamed one of Langa's cousins, who they say interfered with Langa's care. But the cousin said she was simply protecting a relative.

In October 2005, a judge prohibited the Petersons from paying themselves without submitting an approved financial report on Langa's case. Langa died four months later. On that day, records show, the Petersons wrote themselves checks on his account worth $8,765, defying the court order and state law that ends a conservator's role once a ward dies. Two days later, they paid themselves another $1,517.

The Petersons' attorney admitted their actions weren't "orderly... or approved by the court" but he said the expenses were justified. District Judge David Ten Eyck later ruled that the posthumous check writing created "fraud and accountability concerns."

"If I had something to take back, that would be one of the things," Paul Peterson said in an interview. But he said family members of Langa approved the spending.

Ward left without food

After cutting ties to his family, William Hohenauer became a ward of the Petersons in 2003, after his fourth involuntary mental commitment. He suffered from paranoid schizophrenia and had an explosive temper, but was able to move back into his McGregor home.

In 2004, the Petersons cashed in three of Hohenauer's CDs, worth a total of $250,000, and purchased annuities through a friend and former co-worker. They said they were protecting Hohenauer's assets, but the money couldn't be withdrawn for a decade without penalty.

"This investment itself was not for someone who's 62 or 63 years old," said James J. Hill, Hohenauer's cousin. "That was a terrible investment."

Paul Peterson said he was routinely greeted at Hohenauer's home with death threats. But social workers determined that Hohenauer was a victim.

In May 2006, Hohenauer came to Aitkin County social workers in desperation. He had no money for buy food or fix a leaking roof. A social worker called Paul Peterson to release some of Hohenauer's money. "I doubt it," Peterson said, and hung up, according to a "vulnerable adult" investigative report.

Social workers ended up giving Hohenauer $100 to buy groceries. In an interview, Peterson said he offered Hohenauer money, but he refused to take it. An investigation by Crow Wing County Community Services found that the Petersons' failure to provide for Hohenauer was "maltreatment."

In 2006, social workers in Aitkin County accused the Petersons of missing meetings, failing to file reports on time and taking other questionable actions. "Our agency feels that these vulnerable individuals are at risk based on the decisions you have made," Cebelinski said in a letter to the Petersons.

A family takes control

By 2004, Harold Doyle was worth more than $500,000. But the eccentric old man, who lived in a cabin on the shore of Lake Mille Lacs, was struggling to live on his own. When he came to the attention of social services, Doyle was eating out of soup cans, said his niece, Denise Fischer.

Fischer said that the family had trouble keeping track of Doyle because the Petersons kept moving him around. In 2008, her family learned about the problems with the other Peterson guardianships. Like the other cases, the Petersons' accounting was characterized by missing records and questionable expenses, such as billing 21 hours for "personal care" without providing any details, a judge found.

In January 2009, Fischer took over as guardian and conservator. Today, Doyle, 92, lives with an adult foster care provider, his memory erased by Alzheimer's disease. Doyle had always worried that someone would come after his money, Fischer said.

"The very thing my uncle feared happened," she said.

Starting in 2006, Judge Ten Eyck noticed widespread irregularities in the financial reports the Petersons were submitting to the court. The documents were riddled with crossed-out entries and scribbled notes. Ten Eyck threatened to hire an expert to conduct a forensic accounting because he did not trust the accounts they submitted for Hohenauer.

In 2009, Ten Eyck rejected all of their reports and ordered the Petersons to repay $41,000 in "excessive, unreasonable, and unnecessary" fees they paid themselves from Langa, Hohenauer and Doyle. Among those fees: seven hours to write a single letter, double-billing for the same service and mileage reimbursement for visits with the ward that never happened.

The Petersons appealed, and in February 2010, the Court of Appeals sent the case back to Ten Eyck to give the Petersons more opportunity to explain their fees.

On July 8, the Petersons returned to court to try to hang onto their money. Asked in court why they chose to pay themselves $250 per month, in addition to the itemized hourly fees, Paul Peterson said that fee structure benefited his wards: "We just wanted to be fair to the clients and not give ourselves extra."